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Measuring a Nation's Income: Gross Domestic Product (GDP)

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Questions and Answers

What is Gross Domestic Product (GDP) a measure of?

The total value of goods and services exported
The total income for everyone in the country (correct)
The total value of intermediate goods produced
The total value of goods and services imported

What is the GDP identity?

Y = C + I - G + NX
Y = C - I + G + NX
Y = C + I + G + NX (correct)
Y = C - I - G + NX

What is consumption in the context of GDP?

Government spending on goods and services
Household spending on goods and services (correct)
Export of goods and services
Business spending on capital goods

What is investment in the context of GDP?

Purchase of capital goods that will be used to produce other goods and services (A) Signup and view all the answers

What is the difference between nominal GDP and real GDP?

Nominal GDP is valued at current prices, while real GDP is valued at constant prices (B) Signup and view all the answers

What does the GDP deflator measure?

The level of prices relative to the base year (B) Signup and view all the answers

What is inflation?

An increase in the overall price level (B) Signup and view all the answers

What is the Consumer Price Index (CPI)?

A measure of the overall level of prices of goods and services bought by a typical consumer (B) Signup and view all the answers

What is a limitation of GDP as a measure of economic well-being?

All of the above (D) Signup and view all the answers

What is a characteristic of a country with a high GDP per person?

Better life expectancy, literacy, and internet usage (A) Signup and view all the answers

What is the main purpose of the CPI?

To measure the cost of living (A) Signup and view all the answers

What is the main difference between the CPI and the GDP deflator?

CPI measures prices of goods and services bought by consumers, while GDP deflator measures prices of all goods and services produced (B) Signup and view all the answers

What is the natural rate of unemployment?

The rate of unemployment that is naturally around 5% (A) Signup and view all the answers

What is the effect of minimum-wage laws on the labor market?

Decrease employment (B) Signup and view all the answers

What is the main determinant of living standards?

Productivity (C) Signup and view all the answers

What is the benefit of education on the economy?

Increase productivity (A) Signup and view all the answers

What is the catch-up effect in economic growth?

Poor countries tend to grow more rapidly than rich countries (A) Signup and view all the answers